HE 

DOCUMENTS 
DEPT. 


UC-NRLF 


B      3      ^ 


00 

o 

O 
Q 


REPORT 


OF 


Committee  on  Railroads 


OF  THE   SENATE, 


NINETEENTH  GENERAL  ASSEMBLY, 


IOWA, 


AS  PER  RESOLUTION  OF  SENATE  NO.  4. 


PUBLISHED  BY  OR  DEE  OF  THE  SENATE. 


HENRY   W.   ROTHERT,  Lee   County,  Chairman. 


DES  MOINES: 

F.    M.    MILLS,  STATE   PRINTER. 

1882. 


RE  POBT/:  ■;::■•;,::::■.;■;,. 


OF 


Committee  on  Railroads 


OF  THE   SENATE, 


NINETEENTH  GENERAL  ASSEMBLY, 


IOWA, 


AS  PER  RESOLUTION  OF  SENATE  NO.  4. 


PUBLISHED  BY  OR D Eli  OF  THE  SENATE. 


HENRY  W.   ROTHERT,  Lee  County,  Chairman, 


DES  MOINES: 

F.    M.    MILLS,  STATE  PRINTER. 

1882. 


REPORT. 


To  the  Honorable  Senate  of  the  Nineteenth  General  Assemhly  of 

Iowa: 

Senatok  Rotiiert,  from  the  Committee  on  Railwaj's,  submitted 
the  following  report: 

Mr.  Presidknt:  Your  Committee  on  Railways  to  whom  was  re- 
ferred Senate  Resolution  No.  Four;  to-wit, 

'■'■Resolved,  That  the  Raih'oad  Committee  of  the  Senate  are  in- 
structed hereby  to  inquire: 

"1st.  If  competing  railroad  corporations  are  in  the  habit  of  agree- 
ing that  one  road  shall  take  all  the  freight,  or  the  greater  portion  there- 
of, to  and  from,  or  to  or  from,  any  one  point  or  territory  in  tlie  State, 
Avliile  the  other  companies  with  their  railroad  lines  there  located 
refuse  to    take  freight,  in  order  to  carry  out  such  an  agreement. 

"2d.  That  said  committee  make  such  inquiry  concerning  sliip- 
ments  at  Cedar  Rapids,  Dubuque,  Ottuniwa,  or  any  point  where 
there  are  competing  raih'oad  lines,  which  to  said  committee  shall 
seem  proper,  and  to  ascertain  all  about  such  agreements,  if  any  ex- 
ist; and  said  committee  shall  have  the  right  to  subpcpua  and  com- 
pel the  attendance  of  witnesses,  and  shall  have  an}'  statement  which 
any  citizen  may  desire  to  make  on  said  subject  by  written  statement 
in  affidavit  form  or  by  being  personally  present. 

"3d.  That  said  committee  shall  make  any  other  inquiries  which 
to  them  shall  seem  needed,  concerning  the  working  of  the  Railroad 
Comissioner  law,  and  shall  report  fully  and  specifically  to  the  Sen- 
ate on  the  subject  of  this  resolution  on  or  before  the  loth  day  of 
February,  1882,  and,  further,  whether  in  the  judgment  of  said  com- 
mittee any  legislation  is  needed  to  provide  against  the  abuses  sug- 
gested in  the  resolution,  if  such  exist,  and  to  report  a  bill  to  correct 
the  same,  if  practicable";  beg  leave  to  report  that  they  have  had 
the  same  under  consideration,  and  have  instructed  me  to  return  the 
same  to  the  Senate  with  the  following  report: 

Your  committee  have  given  the  subject-matter  of  the  resolution 
as  careful  investigation  as  was  practicable  in  the  brief  time  which 
it  was  possible  to  give  to  the  work,  and  have  to  say  in  answer  to  the 


66726> 


4  REPORT  OF  COMMITTEE  ON  RAILROADS.  fE6. 

iirst  matter  of  inquiry,  that  we  are  imable  to  learn  of  any  agree- 
ment on  the  part  of  any  railroad  to  refuse  to  take  freight  offered, 
that  it  might  go  over  another  line.  The  committee  are  satisfied 
that  such  agreements  are  neither  liabitual  nor  frequent.  One  case 
of  that  kind  in  the  northeast  part  of  the  State  came  to  the  knowl- 
edge of  the  Railway  Commissioners  a  3'ear  or  two  since,  but  upon 
the  suggestion  of  the  Commissioners  the  agreement  was  promptly 
abrogated  by  the  parties  in  interest. 

Your  committee  wish  to  state,  however,  that  pooling  arrange- 
ments exist  at  many  if  not  all  of  the  important  comj^eting  points  in 
the  State,  in  regard  to  inter-State  transportion  whereby  competition 
between  the  railways  there  existing  for  such  traiisportation  is  prac- 
tically prevented.  While  this  is  true,  it  is  also  true  that  the  rates 
of  transportation  between  such  points  and  large  commercial  centers 
outside  the  State  are  less  than  between  such  centers  and  non-com- 
peting points  on  such  railways  nearer  to  such  centers. 

Your  committee  has  inquired  into  the  practical  working  of  the 
Railroad  Commissioners'  law  and  lind  that  it  is  working  well  and 
for  the  benefit  of  the  State  at  large.  While  decisions  of  the  Com- 
missioners have  not  the  legal  force  and  effect  of  those  of  a  court  with 
full  yjower  to  enforce  its  decrees,  yet  the  aid  of  the  Board  is  fre- 
quently requested  by  citizens  of  the  State,  and  their  decisions  have 
been  uniformly  respected  and  obeyed  by  the  railwaj^  companies 
with  but  two  exceptions.  In  these  two  cases  the  railways  were  in 
the  hands  of  federal  authorities.  'So  State  legislation  seems  to  be 
required  to  make  the  present  commissioner  law  more  effective  to 
correct  any  existing  abuse. 

The  pooling  arrangements  to  which  reference  has  been  made,  can 
not  be  controlled  by  State  legislation,  as  they  relate  to  inter-State 
traffic. 

The  committee  acknowledge  themselves  indebted  to  the  Board  of 
Itailroad  Commissioners  for  much  valuable  information  in  re^jard  to 
the  matters  involved  in  the  resolution. 

For  more  specific  information  with  reference  to  above  report  and 
answers  to  interrogatories,  your  committee  annex  the  following  cor- 
respondence had  in  relation  thereto. 

Respectfully  submitted,  for  the  committee, 

Henry  W.  Rothert,  Chairman. 


1882.]  REPORT  OF  COMMITTEE  ON  RAILROADS,  5 

KooMS  OF  Senate  CoMMrrrEE  on  Railway,  ) 
Des  Moines,  Jan.  26,  1882.  \ 

To  the  flonoralAe  Board  of  Railroad  Commissioners  of  Iowa: 

Gentlemen — By  action  of  the  Railwaj'  Coininittee  of  the  Senate,  I 
have  been  instructed  to  refer  enclosed  resolution, passed  by  the  Senate, 
to  your  Honorable  Board,  with  the  request  to  give  said  committee  in 
writingall  the  information  said  Board  may  have  as  to  the  several  points 
embodied  in  said  resolutions.  The  committee  would  be  pleased 
also  t(5  receive  such  personal  information  as  any  individual  member 
of  your  Honorable  Board  may  be  able  to  give  for  the  enlightenment 
and  consideration  of  said  committee. 

Kespectfully  submitted, 

Henry  W.  Rothert, 
Chairman  of  Committee. 

report  of  the  railroad  commissioners  on  the  senate  resolution. 

Hon.  Henry  W.  Rothert^  Chairman  of  the  Railroad  Commit- 
tee of  the  Senate  of  the  State  of  Iowa — Your  letter  of  January 
26,  with  resolution  of  Senator  Hutchison,  which  was  referred  by 
your  committee  to  this  Board,  was  duly  received. 

In  reply  to  the  resolution,  the  Board  of  Railroad  Commissioners 
would  respectfully  state  that  they  have  received  no  complaints  cov- 
ering the  matter  stated  in  the  first  enquir}^  but  that  they  decided  a 
case  which  they  think  involves  the  same  general  principles  which  is 
reported  in  full  in  their  Third  Annual  Report  for  the  year  1880,  (a 
copy  of  the  report  we  send  yon  with  this.)  It  is  the  case  oi Sam- 
uel lilhurn  V.  The  Chicago.,  Rock  Island  dh  Pacific  Railroad 
Company.,  beginning  at  page  77,  and  ending  at  page  108.  The 
case  was  fully  ai'gned  by  able  attorneys,  and  the  de(;ision  mainly 
written  by  Judge  McDill.  In  this  connection  we  think  it  would  be 
worthy  of  careful  examination. 

The  Board  have  written  to  the  various  railroad  companies  that 
are  running  to  all  the  competing  points  in  the  State,  asking  whether 
they  are  in  "  the  habit  of  agreeing  that-  one  road  sliall  take  all  the 
freight  to  or  from  any  point  or  territory  in  the  State,  while  the 
other  roads  with  their  railroad  lines  there  located,  refuse  to  take 
freight  in  order  to  carry  out  such  agreement."  When  the  answers 
are  received  they  will  be  forwarded  to  you. 


Q  REPORT  OF  COMMITTEE  ON  RAILROADS.  [E6. 

The  field  of  enquiry  has  become  so  wide  from  complaints  filed 
that  the  Board  has  comparatively  little  time  to  look  np  grievances  to 
which  their  attention  is  not  specially  called. 

Section  1297  of  the  Code  of  1873  provides  that  parallel  railroads 
shall  not  pool  their  earnings;  this,  however,  the  Board  understands 
does  not  apply  to  inter-State  traffic,  and  that  under  the  holdings  of 
the  Supreme  Court  of  the  United  States,  that  no  State  legislation 
could  have  any  effect.  A  section  might  be  added  that  it  should  be 
unlawful  for  any  railroad  companies  doing  business  in  this  State  to 
apportion  at  competing  points  the  business  of  any  section  or  terri- 
tory in  the  State  in  such  manner  as  to  deprive  the  shipper  of  his 
choice  of  route  to  market. 

The  Board  sends  with  this  letters  received  from  tlie  General  Man- 
ager of  the  Chicago,  Burlington  i!*c  Quincy  I'oad;  the  General  Man- 
ager of  the  Chicago,  Milwaukee  tfe  St.  Paul  Bail  way;  the  General 
Superintendent  of  the  Burlington,  Cedar  Rapids  &  Northern  Rail- 
way Company;  the  General  Manager  of  the  Chicago  &  Northwestern 
Railway  Compan3";the  President  of  the  Chicago,  Rock  Island  &  Pa- 
cific Railway;  and  the  Second  Vice-President  of  the  Wabash,  St. 
Louis  &  Pacific  Railway  Company.  Tliey  all  deny  the  specific 
charge  in  the  resolution;  the  Second  Yice-President  of  the  AVabash 
road  admits  the  pooling  at  competitive  points,  and  we  are  informed 
that  all  the  other  roads  make  the  same  arrangements  that  he  admits 
his  company  makes. 

The  Board  would  respectfully  refer  the  committee  for  valuable 
suirsestions  in  regard  to  the  Commissioners'  law,  to  the  letter  of 
Charles  Francis  Adams,  Jr.,  published  on  pages  73  to  78,  in  their 
Second  Annual  Report,  a  copy  of  which  is  sent  you  with  this. 

The  second  inquiry  of  the  Committee  asks  information  "concern- 
ing shipments  at  Cedar  Rapids,  Dubuque,  Ottumwa,  or  any  other 
point,  and  to  ascertain  all  about  such  agreements,  if  any  exist,"  etc. 
The  Board  are  a  little  at  sea  as  to  the  scope  of  this  inquiry,  the  phrase, 
"such  agreements"  seeming  to  litnit  the  inquiry  to  territorial  divis- 
ions as  to  which  answer  is  fully  made  in  the  reply  to  question  one. 

Having  been  informed  by  the  Chairman  of  the  Senate  Commit- 
tee, Hon.  H.  W.  Rothert,  that  all  arrangements  of  wliatever  kind, 
touching  the  subject  of  transportation  as  it  affects  the  shipper,  are 


18S2.]  REPORT  OF  COMMITTEE  ON  RAILROADS.  7 

sought  for  imder  the  resolution  of  inquiry,  it  is  thought  j)roper  to 
mention  such  as  are  found  to  exist. 

Beginning  with  tlie  Chicago,  Burlington  &  Quincy  Road,  it  has 
an  arrangement  at  Ottuniwa,  and  indeed  at  all  other  competing 
points  on  its  Iowa  lines.  These  arrangements,  as  a  rule,  are  upon  a 
minimuin  charge,  and  the  terms  of  the  agreement  are  to  divide  the 
earnings  on  the  basis  of  an  agreed  ratio.  This  in  some  cases  is  as 
50  to  50  perhaps,  or  60  to  40,  or  70  to  30,  or  75  to  25,  or  any  other 
proportion — the  ratio  being  ascertained  hj  the  relative  gross  re- 
ceipts in  some  cases,  and  tonnage  in  others,  on  the  business  of  both 
for  a  stated  antecedent  time,  say  of  three,  or  six,  or  twelve  months. 

The  Chicago  &  ISTorthwestern  has  also  such  pooling  arrangements 
with  other  lines  at  competing  points,  but  no  division  of  territory  or 
of  the  volume  of  freight.  At  Cedar  Rapids,  for  instance,  the  par- 
ties to  the  arrangement  are  the  Chicago  &  Northwestern,  the  Chi- 
cago, Milwaukee  &,  St.  Paul,  and  the  Burlington,  Cedar  Rapids  & 
Xorthern,  and  the  division  of  the  gross  receipts  on  an  agreed  ratio. 
It  also  has  a  like  arrangement  at  Sioux  City,  Council  Bluffs,  Des 
Moines  and  other  points  of  competition. 

The  Illinois  Central  has  a  similar  arrangement  at  Dubuque, 
Charles  City,  Mona,  Lyle  and  other  points.  In  this  arrangement 
the  division  is  made  on  such  a  basis  as  this,  for  instance:  A  tixed 
percentage  of  the  gross  receipts  of  each  company  is  reserved  to  each 
absolutely,  and  the  remainder  of  each  is  divided  on  the  basis  agreed 
npon;  the  net  balance  being  sometimes  payable  by  the  one,  and 
sometimes  by  the  other.  The  arrangement  is  understood  to  exist  at 
all  points  of  competition. 

Like  arrangements  have  been  made  by  the  Chicago,  Milwaukee 
and  St.  Paul  at  all  competing  points,  the  terms  in  some  cases  cover- 
ing the  surplus  gross  earnings  over  a  hxed  reserve  to  each;  and  in 
others  of  an  agreed  proportion  of  the  gross  receipts.  In  a  few  cases 
these  arrangements  are  as  to  all  kinds  of  freight,  and  in  others  ap- 
ply only  to  certain  specified  articles. 

The  same  is  true  as  to  the  Burlington,  Cedar  Rapids  &  Northern 
at  Cedar  Rapids  and  other  competing  points,  and  doubtless  so  as  to 
all  roads  which  transport  on  inter-State  contracts. 

It  may  be  added  that  most,  if  not  all,  these  engagements  are  be- 
lieved to  be  applicable  to  inter-State  business  only,  though  it  is  pos- 


8  REPORT  OF  COMMITTEE  ON  RAILROADS.  [E6. 

sible  that  they  may,  in  here  and  tliere  an  instance,  apply  to  local  busi- 
ness between  competing  points. 

The  Board  is  not  aware  of  any  other  kind  of  arrangements  existing 
between  the  railways  operating  in  Iowa. 

Peter  A.  Det, 

M.  C.   WOODKUFF, 

A.  R.  Akderson, 

Co  mm  iss  io  n  ers. 

The  above  report  w^as  made  in  writing  to  the  Senate  Committee 
on  Railways,  and  the  Commissioners  on  invitation  being  present 
"with  the  committee,  the  latter  made  a  request  that  the  Commis- 
sioners elucidate  the  subject  of  pooling  in  further  detail — asking 
that  the  pool  arrangement  be  particularly  explained  in  its  practical 
application.     Replying,  the  Commissioners  said: 

On  investigation  we  find  that  all  of  what  are  known  as  trunk  lines, 
or  lines  extending  into  other  States,  have  these  pooling  agreements 
at  points  of  competition;  as,  for  instance,  at  Burlington,  Keokuk, 
Ottumwa,  Albia,  Eddyville,  Council  Bluffs,  Des  Moines,  Grinnell, 
Iowa  City,  Davenport,  Clinton,  Cedar  Rapids,  Marshalltown,  Sioux 
City,  Fort  Dodge,  Webster  City,  Iowa  Falls,  Cedar  Falls,  Waterloo, 
Dubuque,  McGregor,  Charles  City,  Britt,  Mona,  Sheldon,  etc.  These 
and  several  other  points  are  stations  wdiere  competing  lines  intersect, 
each  seeking  to  get  all  the  business  it  can.  The  pool  contract  has 
no  effect  to  limit  the  volume  of  business  of  the  two,  three,  four  or 
more  lines;  each  struggles  to  obtain  all  it  can  get;  each  preferring 
in  final  settlement  of  pool  receipts  to  pay  balances  to  competitors, 
rather  than  receiv^e  such  balances.  By  the  pool,  agreement  is  made 
by  all  the  parties  to  it  upon  a  minimum  charge  for  the  various 
classes  of  freight.  Take  the  case  of  Cedar  Rapids,  for  instance: 
Here  the  Chicago  &  Northwestern,  the  Chicago,  Milwaukee  &  St. 
Paul,  and  the  Burlington,  Cedar  Rapids  <k,  Korthern  companies  are 
in  competition.  Each  struggles  for  all  the  business  it  can  get,  each 
preferring  to  secure  the  larger  proportion,  and  at  settlement  to  pay 
rather  than  receive  a  balance.  The  pool  is  for  a  division  of  the  gross 
receipts;  the  C.  &  "N".  W.,  for  instance,  taking  44  per  cent,  the  C,  M. 
&  St.  P.,  32,  and  the  B.,  C.  R.  &  N.,  24.  At  Dubuque,  the  Illinois 
Central  and  the  Chicago,  Milwaukee  &  St.  Paul   Railways  meet  in 


1882.]  REPORT  OF  COMMITTEE  ON  RAILROADS.  9 

competition.  In  this  instance  the  terras  of  the  pool  are  not  for  a  di- 
vision of  the  gross  earnings,  but  each  reserves  say  60  per  cent  of  its 
gross  earnings,  and  tlie  remaining  40  per  cent  of  Loth  is  placed  to 
to  the  credit  of  pool  account  and  division  made  share  by  share  alike. 
At  other  competing  stations  a  reserve  of  a  given  percentage  of 
gross  earnings  is  made  by  each  company,  say  60  per  cent  by  one 
and  55  by  another — these  proportions  supposably  representing  the 
cost  of  handling  and  moving — and  the  balance  over  from  both  being 
divided  on  agreed  terms,  say  45  per  cent  to  one  and  55  to  the  other- 
All  these  arrangements  are  based  upon  the  facilities,  business,  and 
earnings  of  the  competing  lines,  ascertained  by  comparing  past  ton- 
nage, or  receipts,  or  both.  From  these  facts  it  will  be  seen  that  the 
object  of  the  pool  agreement  is  to  avoid  cutting  of  rates  in  competi- 
tion, and  serious  disturbance  in  business,  occasioned  by  constantly 
fluctuating  rates.     To  tliis  end  they  agree  npon  a  minimum  rate. 

As  a  rule  this  rate  is  alleged  to  be  a  low  one.  Certain  it  is,  the 
pool  rate  is  lower  than  at  non-competing  stations  with  a  shorter 
mileage;  as,  for  instance,  the  rate  on  the  Chicago,  Milwaukee  &  St. 
Paul  from  Sheldon  (a  competing  station)  to  Milwaukee  or  Chicago, 
on  4tli  class  merchandise,  is  50  cents  per  100  lbs.,  while  the  same 
rate  is  charged  from  half  a  dozen  non-competing  stations  at  various 
lesser  distances  up  to  60  miles. 

In  defense  of  this  system  railway  companies  assert  that  it  is  done 
for  the  two-fold  purpose  of  protecting  themselves  from  the  certain 
losses  following  unchecked  competition,  and  of  protecting  shippers 
and  patrons  at  all  non-competing  points.  Tiiis  reasoning  may  be 
stated  thus:  The  railway  carrier  is  entitled  to  a  fair  compensation 
for  the  service  rendered.  To  be  fair  it  must  be  reasonably  profit- 
able. If  under  the  impulse  of  competition  at  junction  points  the 
cutting  of  rates  is  reduced  below  a  profit,  the  loss  must  be  made  up 
at  places  where  no  competition  exists.  Otherwise  not  only  the  rev- 
enues of  the  company  are  lost,  but  the  property  itself  is  going  in  the 
direction  of  bankruptcy.  If  the  pool  agreement  be  not  maintained 
in  good  faith,  the  cutting  of  rates  goes  lower  and  lower,  until  the 
price  has  fallen  to  a  mere  nominal  sum,  as  in  the  case  of  the  period- 
ical rate  wars  between  Chicago  and  the  sea-board  for  the  past  year  or 
two.     In  proportion  as  the  "cut"  rate  under  competition  goes  below 


10  REPORT  OF  COMMITTEE  ON  RAILROADS.  [E6. 

the  paying  point,  in  that  proportion  tlie  loss  must  be  made  good 
upon  non-competing  points.  If  this  be  not  done  the  road-bed,  cars, 
locomotives  and  operating  facilities  are  worn  out,  and  the  line  must 
grow  more  and  more  valueless,  until  it  is  finally  swallowed  up  in 
bankruptcy.  A  railway  cannot  be  maintained  by  a  non-])aying  busi- 
ness. If  it  be  said  that  a  maximum  rate  be  fixed  by  law  for  all  the 
roads  at  all  stations,  non  competing  as  well  as  competing,  the  an- 
swer is  that  this  does  not  prohibit  competition,  or  cutting  of  rates  t 
a  losing  figure.  If  one  road  cuts  the  rate,  the  other  must  come 
down  to  it,  or  it  must  give  up  business  at  that  point.  Now,  if  one 
of  two  or  more  competing  roads  is  stronger  and  richer  than  the  others, 
by  reason  of  its  more  fortunate  location  and  great  business,  it  must 
follow  that  the  weaker  of  these  competitors  will  be  driven  to  tlie 
wall.  This  done,  what  are  the  people  at  all  non-competing  stations 
on  its  line  to  do?  Such  is  the  reasoning  of  the  railways  in  defense 
of  the  pool  system,  as  by  it  they  are  able  to  maintain  a  miriimum 
rate  at  stations  common  to  two  or  more  roads,  \vhereas  by  the  open 
comj)etition,  or  "cutting"  system,  they  must  assess  what  they  thus 
lose  upon  intermediate  points. 

Competition,  to  be  eftectual,  must  first  be  fiee,  and  the  competi- 
tors practically  equal  in  respect  of  strength,  facilities,  and  tributary 
business.  If  any  of  these  conditions  are  wanting,  the  inequality 
makes  successful  competition  in  the  long  run  impracticable  if  not 
impossible.  Secondly,  the  competitors  must  have  lines  substantially 
parallel,  and  when  this  is  the  case  the  business  of  the  tributary 
territorj^  is  divided  between  the  two  or  more  lines.  By  thus  divid- 
ing the  business  between  two  or  more  lines  which  could  be  done 
by  any  one  of  them,  paying  rates  must  be  greater  on  both  in  order 
to  meet  operating  expenses  and  interest  on  the  two  or  more  lines 
instead  of  one.  A  third  difficulty  in  the  way  of  successful  compe- 
tition lies  in  the  fact  that  all  stations  must  have  the  parallel  or  com- 
peting lines,  otherwise  the  competition  is  but  partial  and  discrimina- 
tive. 

[At  this  point  the  Commissioners  were  cited  to  the  fact  that  the 
rate  between  Sioux  City  and  Chicago  was  but  little  if  any  more 
than  the  rate  between  Chicao^o  and  Fort  Dodge — over  a  hundred 
miles  less  distance.  The  explanation  and  answer  of  the  Commis- 
sioners was  as  follows:] 


1882.1  KEPORT  OF  COMMITTEE  ON  RAILROADS.  H 

The  Illinois  Central  line  runs  through  Fort  Dodge  and  connects 
Sioux  Cit}'  and  Chicago.  At  both  terminal  points  this  line  has 
.powerful  competitors  in  the  Chicago,  Milwaukee  &  St.  Paul,  and 
the  Chicago  &  Northwestern.  The  latter  does  a  business  in  Iowa 
which  in  volume  and  earnings  is  about  double  that  of  the  Illinois 
Central.  The  practical  question  for  the  Illinois  Central  is,  shall  it 
have  its  fair  share  of  the  business  at  Sioux  City?  If  it  ought  and 
must  have  it,  its  rates  must  be  as  low  as  the  lowest  competitor's.  If 
it  surrenders  its  proper  share  its  road  from  Sioux  City  to  the  next 
station  eastward  is  rendered  practically  worthless,  the  thousands  'of 
dollars  invested  in  it  being  thrown  away.  If  so  much  of  its  line 
be  thus  abandoned  because  b}^  refusing  to  compete  it  has  been  shut 
out  of  business,  the  entire  line  is  seriously  crippled  as  a  through 
route  into  the  territories  to  the  west  of  Sioux  City.  Thus  that  road 
is  forced  to  accept  one  of  two  alternatives:  Compete  at  such  rates  as 
it  can  get,  and  tlius  divert  all  through  business  from  that  route  to 
other  more  wisel}^  managed  routes,  or  quit  business  at  that  point, 
or,  it  must  agree  upon  a  minimum  rate  under  a  pooling  agreement. 
This  low  pool  rate  is  not  a  voluntary  but  a  forced  oqe;  the  rates  at 
non-competing  points  being  free  and  unforced  are  held  to  be  fair 
and  reasonable  under  all  circumstances.  While  there  is  no  sound 
reason  in  abstract  equity  why  a  less  charge  is  made  for  a  longer 
distance — all  other  conditions  being  alike — the  practical  question 
arises,  what  else  can  be  done?  If  legislation  shall  be  able  to  answer 
this  question  successfully  it  will  have  done  what  has  not  yet  any- 
where been  demonstrated. 

[Here  another  case  was  put  to  the  Commissioners.  It  was  stated 
that  Fort  Dodge  merchants  desired  to  build  up  a  jobbing  or  whole- 
sale trade,  but  that  it  was  impossible  because  nothing  below  the 
Sioux  City  rate  from  Chicago  could  be  obtained.  To  this,  answer 
was  made  as  follows :] 

Fort  Dodge  is  a  station  over  a  hundred  miles  less  in  distance  fi'om 
Chicago  than  Sioux  City.  Its  competition,  if  any,  is  with  a  class  "B" 
road,  and  is  therefore  not  very  sharp,  while  at  Sioux  City  it  meets 
two  of  the  strongest  competing  lines  in  the  State.  While  the  rates 
between  Fort  Dodge  and  Chicago  are  as  high,  perhaps,  as  to  Sioux 
City,  they  are  less  than  to  many,  if  not  all,  the  stations  between  Fort 
Dodge  and  Sioux  City.     The  Fort  Dodge  rate  is  also  as  low  or 


12  REPORT  OF  COMMITTEE  ON  RAILROADS.  [E6. 

lower  thfin  to  several  stations  east  of  it — a  sliorter  distance.  In  this 
way  a  general  balancing  is  readied.  What  is  wanted  at  Fort 
Dodge,  nnder  the  case  as  put,  is  a  better  rate  than  it  now  has, 
and  it  already  has  a  better  rate  than  other  stations  having  a  shorter 
haul.  And  this  aifords  a  key  to  the  whole  question  as  expressed  by 
tlie  Senate  Committee's  resolution  of  inquiry;  to-wit,  Each  station 
in  the  State  would  like  a  little  lower  rate  than  the  next  neighbor. 

To  sum  up,  it  is  a  very  intricate  and  difficult  problem  to  solve. 
The  Commissioners  find  that  the  railways  do  their  business  much  as 
other  business  is  done,  and  are  governed  by  the  same  motives,  in- 
terests, and  rules.  It  is  very  probable  that  abuses  exist,  but  how 
are  they  to  be  njet  and  overcome  is  the  question.  Up  to  this  time 
legislation  has  been  unequal  to  the  task.  That  correction  will  some 
time  be  reached  is  certain,  but  how  does  not  yet  appear. 

To  show  the  greatest  difficulty  of  all,  it  must  be  understood  that 
these  pool  arrangements  are  on  intei'-State  business,  the  Commis- 
sioners knowing  of  none  on  business  wholly  within  tlie  State,  Hence 
the  Iowa  legislature  is  without  jurisdiction,  its  power  extending 
only  to  contracts  within  the  State  limits.  Besides,  as  between 
eighty  and  eighty-five  per  cent  of  the  traffic  is  of  inter-State  character, 
and  as  the  low  or  oniniinum  jjool  rate  at  all  pool  points  is  on  through 
or  inter-State  traffic,  and  as  all  these  pool  stations  combined  proba- 
bly include  a  very  large  proportion  of  tlie  whole  traffic,  the  difficul- 
ties at  the  very  threshold  of  the  case  seem  to  be  beyond  the  range 
of  local  regulation. 

DISCRIMINATION. 

As  this  inquiry  has  raised  one  form  of  the  general  subject  of  dis- 
crimination, the  Commissioners  cannot  better  meet  it  than  by  calling 
the  committee's  attention  to  their  discussion  of  it  on  pages  179,  180, 
and  181  of  their  report  for  180,  as  follows: 

Section  13  of  the  Commissioner  law  wisely  prohibits  unjust  discrimination. 
This,  in  the  nature  of  the  business,  is  absolutely  necessary.  The  classification  of 
articles  carried  is  in  most  cases  discriminatory  in  its  character  and  governed  by  the 
value,  The  frei^fht  tariffs  are  governed  less  by  the  cost  of  carriage  in  most  articles 
than  the  amount  they  will  bear  and  not  prevent  production  or  use.  The  more 
valuable  goods  always  pay  first-class  rates,  and  this  is  not  a  question  of  risk  or 
cost  of  carriage.  This  principle  is  carried  still  further,  and,  we  think,  properly,  in 
the  rates  at  competing  points.      A  road  at  competitive  points,  if  it  secures  any 


1882.]  REPORT  OF  COMMITTEE  ON  RAILROADS.  13 

business,  must  get  it  at  a  rate  lower  than  would  be  fixed  did  not  competition  deter- 
rame  it.  The  shipper  at  a  non-competitive  point  believes  that  he  is  greatly  injured 
if  his  rates  are  higher,  and  yet  it  is  not  true  that  if  the  business  of  the  competitive 
points  furnishes  any  profit  to  the  carrier,  he  can  by  that  much  less  afford  to  carry 
his  freight  at  intermediate  points.  If  he  was  compelled  to  carry  all  his  business  at 
the  rate  of  the  competitive  point,  he  would  of  necessity  be  compelled  to  abandon  it 
and  confine  himself  to  his  local  business.  The  local  would  necessarily  be  higher 
by  the  amount  of  profit  that  might  accrue  from  competitive  points.  It  was  a  fa- 
vorite theory  of  the  Commissioners,  and  only  abandoned  after  a  careful  study  of  its 
effect,  that  the  State  should  pass  some  law  prohibiting  the  roads  from  charging 
higher  rates  for  a  shorter  than  a  longer  distance.  Coupled  with  this  was  the  idea 
that  some  such  enactment  might  prevent  the  fluctuating  and  ruinous  rates  at  com- 
peting points,  and  place  part  of  the  burden  of  operating  and  maintaining  the 
roads  on  the  through  traffic.  One  of  the  oldest  railway  managers  in  the  West,  in 
reviewing  this  subject,  says: 

"  Nobody  deplores  foolish  and  reckless  competition  like  that  carried  on  from 
Missouri  River  points  in  the  Southwest,  more  than  the  thoughtful  railway  man- 
ager, and  if  a  law  applicable  to  all  the  States  could  be  enacted  that  would  prohibit 
such  ruinously  low  rates,  and  punish  severely  the  parties  making  them,  I  feel  sure 
that  the  railway  managers  would  welcome  it.  But  if  the  Iowa  roads  are  prohibited 
from  making  any  higher  charge  than  their  proportion  of  a  through  rate  from  New 
York  to  California — rates  varying  from  time  to  time  to  meet  the  requirements  of 
commerce,  and  sometimes  made  without  the  knowledge  or  consent  of  the  managers 
of  the  Iowa  lines — they  must  either  do  all  their  business  at  rates  that  will  yield 
insufficient  revenue  to  pay  interest  and  dividends,  or  maintain  high  rates  on  local 
and  allow  through  business  to  be  mainly  carried  through  States  where  no  such 
prohibition  exists.  A  loss  of  the  through  business,  so  long  as  it  yields  any  net 
revenue,  lessens  the  ability  of  the  railway  companies  to  reduce  local  transportation. 
It  is  evident  that  any  profit  derived  from  competitive  business  must  be  a  benefit  to 
local  shippers,  because  it  lessens  local  charges." 

It  may  be  a  question  whether  the  State  has  the  power  to  fix  this  limit,  and 
whether  it  might  not  be  considered  a  regulation  of  inter-State  commerce.  The 
Supreme  Court  of  the  United  States,  in  deciding  the  Pennsylvania  case,  says: 

"  If  the  power  to  fix  tolls  upon  inter-State  commerce  is  allowed,  it  would  be  in 
the  power  of  the  Eastern  States  to  exclude  entirely  the  products  of  the  West  from 
the  sea-board  by  fixing  a  local  rate  that  would  prevent  any  through  business  being 
carried." 

Should  the  States  of  Iowa,  Missouri,  and  Illinois  order  that  the  local  and  through 
rates  be  the  same,  it  might  effectually  prevent  Kansas  and  Nebraska  products 
reaching  an  Eastern  market.  Again,  the  same  court  held  that  "The  State  may, 
at  its  discretion,  tax  its  own  internal  commerce,  so  that  inter-State  intercourse, 
commerce,  or  trade  be  not  embarrassed  or  restricted."  Whether  a  tax  on  gross 
receipts  of  a  railroad  is  constitutional,  has  been  affirmed  by  the  Supreme  Court  of 
the  United  States,  Judges  Miller,  Field,  and  Hunt  dissenting.  Judge  Miller,  in 
writing  the  dissenting  opinion,  uses  this  language: 

"  I  lay  down  the  broad  proposition  that  by  no  device  or  evasion,  by  no  form  of 
statutory  words,  can  a  State  compel  citizens  of  another  State  to  pay  to  it  a  tax, 
contribution,  or  toll,  for  the  privilege  of  having  their  goods  transported  through 
that  State  by  the  ordinary  channels  of  commerce.  The  inter-State  commerce  of 
to-day  far  exceeds  in  value  that  which  is  foreign,  and  it  is  of  immense  importance, 
and  it  should  not  be  shackled  by  restrictions  imposed  by  any  State." 


X4  REPORT  OF  COMMITTEE  ON  RAILROADS.  [E6. 

In  l)otli  their  former  reports  this  Board  has  endeavored  to  give 
proniiiience  to  the  idea  that  people  situated  as  we  are,  almost  in  the 
center  of  the  continent,  and  dependent  mainly  on  all  rail  transjDorta- 
tion  to  the  sea-board  for  our  bulky  surplus  products  whose  final 
market  was  Liverpool  or  London,  could  not  afford  to  give  too  inucli 
prominence  to  short  rates;  that  our  interest  is  in  the  long  haul,  and 
if  this  is  reduced  to  the  minimum  we  can  afford  to  pay  a  reasonable 
profit  on  our  short  hauls.  Our  fears  have  been  that  legislative  in- 
terference in  the  States  east  of  us  might  in  some  way  affect  unfa- 
vorably the  through  business. 

Peter  A.  Dey, 

M.  C.  Woodruff, 
A.  R.  Anderson, 
Railroad  Comm  issioiiers. 

railroad  committee  of  the  senate. 

Henry  W.  Rothert,  Lee  county  (chairman). 

E.  J.  Hartshorn,  Palo  Alto  county. 

E.  D.  Nichols,  Guthrie  county. 

A.  Hebard,  Montgomery  county. 

J.  K.  Graves,  Dubuque  county. 

J.  0.  Schrader,  Johnson  county. 

Delos  Arnold,  Marshall  county. 

A.  N.  Poyneer,  Tama  county. 

H.  A.  Baker,  Winneshiek  county. 

T.  E.  Clark,  Page  county. 

J.  L.  Kamrar,  Hamilton  county. 

J.  W.  Henderson,  Limi  county. 

G.  S.  Robinson,  Buena  Yista  county. 


Chicago,  Burijngton  &  Quincy  Railhoad  Co.,  ) 

T.  J.  Potter,  General  Manager,  >• 

Chicago,  February  3,  1882.    ^  ) 

E.  G.  Morgan,  Esq.,  Secretary  Board  E.  E.  Corners,  Des  Moines,  Iowa: 

Dear  Sir — Yours  of  the  1st  inst.  to  C.  E.  Perkins,  President,  is  referred  to  this 
office  for  reply. 

You  ask,  "  Whether  your  company  is  in  the  habit  of  agreeing-  with  other  roads 
at  Burlington,  Fairfield.  Ottumwa,  Albia,  Knoxville,  Ues  Moines,  Indianola,  Gris- 
wold,  Carson,  Humeston,  Shenandoah,  Malvern,  Clarinda,  or  Council  Bluffs,  that 
one  road  shall  take  all  the  freight  or  the  greater  portion  thereof,  to  or  from  any 
one  point  or  territory  in  the  State,  while  the  other  companies  with  their  railroad 
lines  there  located  refuse  to  take  freight  in  order  to  carry  out  such  agreement?" 

I  would  say  we  are  not  in  the  habit  of  making  any  such  agreement  at  the  points 
named,  but  give  the  parties  the  privilege  of  shipping  upon  any  line  they  choose  to 
patronize.  Yours  truly, 

T.  J.  PCT-ER. 


1882.1  REPORT  OF  COMMITTEE  ON  RAILROADS.  15 

Chicago,  Milwaukee  and  St.  Paul  Railway,   ) 

General  Manager's  Office,  >• 

Milwaukee,  February  3,  1882.      ) 

E.  G.  Morgan,  Esq.,  Secretary  Commissioners,  Des  Moines: 

Dear  Sir— I  have  received  your  favor  of  first  inst.,  asking  whether  this  com- 
pany is  in  the  habit  of  ag-reeing  with  other  roads  at  various  points  in  Iowa  that 
one  road  shall  take  all  the  business,  and  the  other  refuse  to  take  it,  in  order  to  carry 
out  such  agreement. 

This  company  has  no  agreement  with  any  other  road  of  the  nature  described, 
neither  has  it  ever  made  any  such  agreement.     On  the  contrary,  it  aims  to  carry  its 
full  share  of  the  business  to  and  from  all  common  or  competing  points  in  Iowa. 
Yours  truly, 

S.  S.  Merrill,  General  Manager. 


Milwaukee,  Cedar  Rapids  &  Northern  ) 

Railway  Company,  >• 

Cedar  Rapids,  Iowa,  February  3,  1882.      ) 

E.  G.  Morgan,  Esq,  Secretary  Railroad  Commissioners,  Des  Moines,  Iowa: 

Dear  Sir — I  am  in  receipt  of  yours  of  February  first,  in  regard  to  inquiry  of  the 
Railway  Committee  of  the  Senate,  and  in  reply  would  say,  that  we  have  no  arrange- 
ment at  either  of  the  points  named,  in  regard  to  either  taking  all  the  business  or 
most  of  it  by  our  line,  neither  of  allowing  most  of  the  business  to  go  by  any  other 
line,  but  we  work  actively  for  all  the  business  we  can  get  at  agreed  rates,  which 
would  naturally  go  over  our  road. 
Trusting  this  information  is  sufficient,  and  answers  the  inquiry  fully,  I  am. 
Yours  truly, 

C.  J.  IvES,  General  Superintendent. 


Chicago  &  Northwestern  Railway  Company,   ^ 
Office  op  Second  Vice-Presdent  and  General  Manager,  >- 

Chicago,  January  6, 1882.      ) 

E.  G.  Morgan,  Esq.,  Secretary  Railroad  Commission : 

Dear  Sir — On  my  return  to-day  to  the  city,  I  am  in  receipt  of  yours  of  Febniary 
1st,  inquiring  whether  the  Chicago  &  Northwestern  Rail-vay  Company  ''  is  in  the 
habit  of  agreeing  with  other  roads  at  Clinton,  Cedar  Rapids,  Marshalltown, 
Grand  .Junction,  Jefferson,  Council  Bluffs,  and  Sioux  City,  that  one  road  shall 
take  all  the  freight,  or  the  greatest  portion  thereof,  to  and  from  any  one  point  or 
territory  in  the  State,  while  the  other  companies  with  their  railroad  lines  there 
located,  refuse  to  take  freight  in  order  to  carry  out  such  agreement." 

In  answer  to  the  foregoing  inquiry,  permit  me  to  say  the  C.  &  N.  W.  R.  R.  Co. 
has  no  agreement  or  understanding  with  other  railroad  companies  whereby  it  will 
refuse  to  take  any  or  all  freights  offered  for  transportation,  in  order  that  any  other 
transportation  company  may  carry  such  freights. 
Very  truly, 

Marvin  Hughitt. 


15  REPORT  OF  COMMITTEE  ON  RAILROADS.  [E6. 

Chicago,  Rock  Island  &  Pacific  Railway, 
Office  op  the  President, 

Chicago,  February,  1882. 

E.  G.  Morgan,  Esq.,  Sec'i/  B\l  R.  R.  Commissioners  of  Iowa: 

Dear  Sir — In  reply  to  the  inquiry  by  the  Railroad  Committee  of  the  Senate, 
"whether  your  Company  (Rock  island)  is  in  the  habit  of  agreeing  with  other 
roads  at  Davenport,  West  Liberty,  Columbus  Junction,  Iowa  City,  Fairfield,  Grin- 
nell,  Keokuk,  Ottumwa,  Knoxville.  Des  Moines,  Indianola,  Griswold,  Carson,  or 
Council  Bluffs,  that  one  road  shaU  take  all  the  freight  or  the  greatest  portion  thereof 
to  or  from  any  one  point  or  territoiy  in  the  State,  while  the  other  companies,  with 
their  railroad  lines  there  located,  refuse  to  take  freight  in  order  to  carry  out  such 
agreement,  I  answer:  this  company  are  not  in  the  habit  of  making  such  agree- 
ments, and  that  no  such  agreement  exists  on  the  part  of  this  company  to  the  best 
of  my  knowledge  and  belief.  Respectfully  yours, 

Hugh  Riddle,  President. 


Wabash,  St.  Louis  &  Pacific  Railavay  Company, 
Office  of  Second  Vice-President, 

Saint  Louis,  February  6,  1882. 

E.  G.  Morgan,  Esq.,  Secretary  Railroad  Commissioners,  Des  Moines,  Iowa: 

Dear  Sir— Your  letter  of  February  1st  to  Col.  Haw,  Third  Vice-President,  has 
been  handed  to  me  for  reply,  and  I  wish  to  say  that  we  have  no  agreement  or  un- 
derstanding with  any  neighboring  road  which  debars  us  from  doing  our  share  of 
the  business. 

It  has  been  found  necessary,  in  order  to  avoid  undue  competition,  to  agree  fairly 
upon  rates  to  points  reached  by  either  road,  and  also  to  agree  on  a  fair  division  of 
the  business.  In  other  words:  We  have  an  arrangement  with  some  of  our  neigh- 
bors in  Iowa,  Avhereby  the  business  of  certain  stations  is  pooled,  and,  whichever 
road  carries  more  than  its  percentage,  pays  over  the  difference  to  the  road  which  is 
in  aiTcars  in  its  earnings. 

Each  road  has  business  located  on  its  track;  each  road  has  grain  houses,  stock 
j'ards,  etc.,  at  or  near  the  junction  points,  and  owned  and  operated  by  people  who 
are  anxious  to  do  business  for  any  person  who  is  engaged  in  the  shipping  business. 

Your  inquiry  leads  me  to  think  that  misrepresentations  have  been  made  to  the 
Senate  Committee.  I  need  only  add  that  I  can  assure  you  there  is  no  arrangement, 
so  far  as  I  know,  which  renders  it  necessary  for  either  of  the  roads  to  decline  taking 
business.  Yours  truly,  Ira  C.  Gault,  Second  Vice-President. 


Illinois  Central  Railroad  Company,   ) 
Chicago,  February  10,  1882.      ) 

E.  G.  Morgan,  Esq.,  Secretary  Railroad  Commissioners,  Des  Moines,  Iowa: 

Dear  Sir — 1  beg  to  acknowledge  receipt  of  your  favor  of  the  1st  inst.  received 
during  ray  absence  East. 

This  company  has  no  agreement  with  any  other  roads  at  Dubuque,  Delaware, 
Independence,  Waterloo,  Cedar  Falls,  Charles  City,  Ackley,  Webster  City,  Fort 
Dodge,  Lemars  or  Sioux  City,  that  one  road  shall  take  all  the  freight  or  the  great- 
est portion  thereof  to  or  from  any  other  point  or  territory  in  the  State. 

This  company  and  the  Chicago,  Milwaukee  &  St.  Paul  Railroad  Company  did 
endeavor  to  induce  shipments  of  freight  from  that  point  by  the  shortest  line  to  its 
point  of  destination.  This  was  done  principally  to  meet  the  requirements  of  the 
shippei-s  in  the  matter  of  the  supply  of  cars  that  could  run  through  to  destination 
without  change,  thus  ensuring  prompt  movement  of  business.  We  consider  this 
arrangement  for  shipment  by  the  shortest  route  the  best  for  the  shippers  as  well  as 
the  most  desirable  for  the  road.  It  is,  however,  entirely  optional  with  the  shipper 
or  consignee  to  select  his  own  route. 

Yours  truly,  W.  K.  Ackerman,  President. 


S5»5BS« 


I 


V 


